The Reckitt Benckiser share price slumped to its worst trading day for 18 years after the consumer goods giant revealed bleak trading conditions.
Not since February 2013 has FTSE 100 constituent, Reckitt Benckiser Group plc (LON: RKT) suffered a decline of this magnitude.
Reckitt, which owns the Dettol, Lysol and Strepsils brands, should have proven a sure-fire winner for investors in the age of Covid-19. However, as the world recovers from the virus threat, RKT faces another; Inflation.
Disappointing sales figures for the first half of the year we compounded by a £3 billion write-off against the disastrous acquisition of baby milf group Mead Johnson.
As a result, Reckitt announced a £1.9bn loss for the first half.
Furthermore, CFO Jeff Carr warned investors that the rising costs of goods would provide considerable headwinds for the rest of the year:
“We’re now looking at 8-9% inflation on cost of goods over the full year for 2021, clearly putting pressure on the second half of the year”
With RKT now trading at a price not seen since before the start of the pandemic, investors are left wondering just how bad it can get.
RKT price forecast
The daily chart highlights the technical destruction caused by yesterday’s bloodbath.
Although, there may be a small glimmer of hope for the Reckitt Benckiser share price. Despite trading down to 5,600p, RKT recovered and closed at 5,700p, just above the previous 2021 low at 5,691p.
Furthermore, a Relative Strength Index reading of 22.0 points to the shares being extremely oversold. Not to mention the huge trading volume suggests many of the bulls have thrown in the towel.
However, RKT is below the major 50,100, and 200-day moving averages at 6,426p, 6,390p and 6,421p. And considering the pessimistic forward guidance, the path of least resistance should be lower. An obvious target is the March 2020 low of 4,921p, around 13.5% below the latest price.
Although the decline looks a little stretched, the bearish outlook remains as long as Reckitt stays below the key moving averages.